Mulally on Tuesday ended months of speculation by saying he won’t leave Ford for Microsoft. But the Ford CEO had been telling people inside Ford for weeks that he wouldn’t be the next Microsoft CEO, people familiar with those discussions said.

Ford CEO Alan Mulally soured on Microsoft’s CEO search process, and decided to stay in his current job.

Reuters

Other people familiar with Mulally’s thinking said the Ford executive soured on the Microsoft job in part because of what he perceived to be leaks from Microsoft about the search process. Microsoft’s board has been seeking a new leader since Steve Ballmer said in August he planned to retire within a year.

The people familiar with Mulally’s thinking said the Ford CEO also had concerns about the dynamics of Microsoft’s board, including whether Ballmer and Chairman Bill Gates remained directors. Other executives who have spoken to Microsoft directors about the CEO post have expressed similar concerns, people familiar with the matter have said.

Ballmer’s announcement of his planned retirement prompted a sweeping search for his successor, with Mulally among more than 100 possible CEOs identified by the Microsoft board.

But Mulally had been eying the Microsoft CEO job even before Ballmer’s announcement. A person familiar with the situation said Mulally told an acquaintance more than a year ago, in late 2012, that Microsoft and Google were the only companies he would be interested in leading after retiring from Ford. Neither of those companies was looking for a CEO at the time. In November 2012, Ford said Mulally would retire in 2014 and promoted Mark Fields to be chief operating officer, signalling him as a potential successor.

Mulally’s statement that he would remain at Ford disappointed some investors, who believed Mulally would prune Microsoft’s sprawling portfolio and return more cash to shareholders. Microsoft shares Wednesday slipped 1.8%, or 65 cents, to $35.76.

Mulally’s waning recent interest in the CEO post coincided with concerns of critics who said the 68-year-old executive’s age and lack of software experience made him a poor fit to lead the world’s largest software company by revenue. Mulally is an aeronautical engineer, but has never worked in the computer or software industries.

At Microsoft’s November shareholder meeting, Gates said the next CEO needed to “have a lot of comfort in leading a highly technical organization.” Some Microsoft watchers interpreted the comments as a sign the board preferred a CEO steeped in the tech industry, rather than a proven manager like Mulally.

In recent weeks, Wall Street analysts started to lower the odds of Mulally landing at Microsoft. As a result, the company’s share price eased off an early-December high of $38.98.

While Microsoft directors initially hoped to pick a CEO before the end of 2013, the board last month said its work would continue into this year.

Besides Mulally, others who at one time discussed the CEO job with Microsoft directors have included Nokiaexecutive Stephen Elop, Oracle President Mark Hurd, Pivotal Software CEO Paul Maritz and Microsoft executives Satya Nadella and Tony Bates. Elop will soon return to Microsoft, when it completes its acquisition of Nokia’s mobile-phone business.

Maritz and Hurd early in the CEO search said they weren’t interested. Other possible contenders have effectively removed themselves from the running by taking other posts.

Note: This post has been revised to correct Ford’s November 2012 announcement about Mulally’s planned retirement. An earlier version incorrectly said Ford had named Mark Fields as Mulally’s successor.